An investment group offers their clients advice on creating a diversified investment portfolio. A client asks...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
An investment group offers their clients advice on creating a diversified investment portfolio. A client asks them to develop a portfolio that includes Investment in a Domestic Growth Fund (a mutual fund composed of US stocks with a history of strong performance) and a corporate bond fund. The Domestic Growth Fund has an expected return of 7.80% with a standard deviation of 18.45%. The corporate bond fund has an expected percent return of 5.75% with a standard deviation of 4.80%. The covariance of an investment in the Domestic Growth Fund with an investment in a corporate bond fund is -12.6. (Round your answers for standard deviation to two decimal places.) (a) Which of the funds would be considered the more risky? Why? The Domestic Growth Fund would be considered more risky because it has a larger expected percent return. The Domestic Growth Fund would be considered more risky because it has a larger standard deviation. Neither fund is risky since both are equivalent. The corporate bond fund would be considered more risky because it has a smaller expected percent return. The corporate bond fund would be considered more risky because it has a smaller standard deviation. (b) If the investment group recommends that the client invest 75% in the Domestic Growth Fund and 25% in the corporate bond fund, what is the expected percent return and standard deviation for such a portfolio? expected percent return % (Do not round) standard deviation What would be the expected return and standard deviation, in dollars, for a client Investing $40,000 in such a portfolio? expected return $ standard deviation $ % (Round to 2 decimal places) (Round to the nearest dollar, and do NOT include the original $40,000 investment amount) (Round to the nearest dollar) (c) If the investment group recommends that the client invest 25% in the Domestic Growth Fund and 75% in the corporate bond fund, what is the expected return and standard deviation for such a portfolio? expected percent return standard deviation % (Do not round) % (Round to 2 decimal places) What would be the expected return and standard deviation, in dollars, for a client investing $40,000 in such a portfolio? expected return (Round to the nearest dollar, and do NOT include the original $40,000 investment amount) An investment group offers their clients advice on creating a diversified investment portfolio. A client asks them to develop a portfolio that includes Investment in a Domestic Growth Fund (a mutual fund composed of US stocks with a history of strong performance) and a corporate bond fund. The Domestic Growth Fund has an expected return of 7.80% with a standard deviation of 18.45%. The corporate bond fund has an expected percent return of 5.75% with a standard deviation of 4.80%. The covariance of an investment in the Domestic Growth Fund with an investment in a corporate bond fund is -12.6. (Round your answers for standard deviation to two decimal places.) (a) Which of the funds would be considered the more risky? Why? The Domestic Growth Fund would be considered more risky because it has a larger expected percent return. The Domestic Growth Fund would be considered more risky because it has a larger standard deviation. Neither fund is risky since both are equivalent. The corporate bond fund would be considered more risky because it has a smaller expected percent return. The corporate bond fund would be considered more risky because it has a smaller standard deviation. (b) If the investment group recommends that the client invest 75% in the Domestic Growth Fund and 25% in the corporate bond fund, what is the expected percent return and standard deviation for such a portfolio? expected percent return % (Do not round) standard deviation What would be the expected return and standard deviation, in dollars, for a client Investing $40,000 in such a portfolio? expected return $ standard deviation $ % (Round to 2 decimal places) (Round to the nearest dollar, and do NOT include the original $40,000 investment amount) (Round to the nearest dollar) (c) If the investment group recommends that the client invest 25% in the Domestic Growth Fund and 75% in the corporate bond fund, what is the expected return and standard deviation for such a portfolio? expected percent return standard deviation % (Do not round) % (Round to 2 decimal places) What would be the expected return and standard deviation, in dollars, for a client investing $40,000 in such a portfolio? expected return (Round to the nearest dollar, and do NOT include the original $40,000 investment amount)
Expert Answer:
Answer rating: 100% (QA)
a The Domestic Growth Fund would be considered more risky because it has a larger standard deviation ... View the full answer
Related Book For
Auditing Cases An Interactive Learning Approach
ISBN: 978-0132423502
4th Edition
Authors: Steven M Glover, Douglas F Prawitt
Posted Date:
Students also viewed these finance questions
-
An investment group offers their clients advice on creating a diversified investment portfolio. A client asks them to develop a portfolio that includes investment in a Domestic Growth Fund (a mutual...
-
Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. What determines the success of capacity planning is...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Recruitment and selection involves the following except: a) building a pool of candidates. b) applicants completing application forms. c) downsizing the organization. d) employment planning and...
-
Show that f (x) = x3 2x2 + 2x is an increasing function.
-
(a) Averaged over a long time interval, for what fraction of the time interval does the pendulum in Figure 19.3 have more than \(50 \%\) of the energy of the system? (b) Does this fraction increase,...
-
Use Laplace transforms to sum the following series or write as a single integral. a. \(\sum_{n=0}^{\infty} \frac{(-1)^{n}}{1+2 n}\). b. \(\sum_{n=1}^{\infty} \frac{1}{n(n+3)}\). c....
-
Anthony Herrera recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for $5 per person. To differentiate his gym and better serve his clients, Anthony...
-
answer all the MCQ's questions 1.Adele, a 45-year old grandparenthas assumed the care of her 10-year old granddaughter Mindy after the death of her daughter and son-in-law in an accident. Adele is...
-
1. You own a portfolio that is 15% invested in Stock X, 30% in stock Y, and 55% in stock Z. The expected returns on these three stocks are 8%, 11%, and 13%, respectively. What is the expected...
-
A company provides cost-effective solutions for managing regulatory requirements and the company needs specific to the airline industry. Assume that on July 1 the company issues a one-year note for...
-
6. Why does the magic sand not immediately sink if sand is heavier than water? 7. What is the silvery layer surrounding the sand in water?
-
The following activities which is not likely to be an interaction between a financial manager in the marketing manager.
-
Consider the following function and then answer the question 29 and 30. ALGORITHM q29p (A[1...r]) BEGIN p=A[1]; i=1;j=r+1 repeat repeat i=i+1 until A[i] >=p repeat j=j-1 until A[j] =j swap (A[i],...
-
The average recommended calorie intake for men is 2550 Cal. If an average of 6 kcal is obtained per gram of food, and meals are had three times a day, how many grams must each meal be? 283 142 213...
-
Describe the mechanisms used by operating systems to enforce memory protection and isolation between processes. How do techniques like address space layout randomization (ASLR) contribute to system...
-
A random sample of 10 houses heated with natural gas in a particular area, is selected, and the amount of gas (in therms) used during the month of January is determined for each house. The resulting...
-
The information below relates to the audit of EyeMax Corporation, a client with a calendar year-end. EyeMax has debt agreements associated with publicly traded bonds that require audited financial...
-
On January 24, 2008, Socit Gnrale, Frances second largest bank announced the largest trading loss in history, a staggering 4.9 billion Euro ($7.2 billion U.S.), which it blamed on a single rogue...
-
All appeared well at Comptronix Corporation; a Guntersville, Alabama based electronics company; until word hit the streets November 25, 1992 that there had been a fraud. When reports surfaced that...
-
Your family shares the cooking duties in the home. You've agreed to prepare the meal every 5 days. The last time you prepared dinner was a Tuesday. What day of the week will it be after you've...
-
You have agreed to text your friend every 3 hours while driving across the country. You began your trip at 8 AM. What time will it be when you text your friend the 15 th time?
-
If it is \(7: 00\) now, what time was it 34 hours ago?
Study smarter with the SolutionInn App